Texas oil production moving up in world ranking

Unlike unprocessed crude, companies can freely sell gasoline, diesel and other petroleum products from the United States overseas.

Unlike unprocessed crude, companies can freely sell gasoline,...

By the end of this year, Texas' oil production could exceed the output of every OPEC country but Saudi Arabia.

The state's production, driven mainly by the Eagle Ford Shale in South Texas and the Permian Basin in West Texas, will reach about 3.4 million barrels per day, propelling Texas past Iraq and Iran, said Greg Leveille, manager for technology program-unconventional reservoirs at ConocoPhillips.

Leveille said the high crude oil content of the Eagle Ford and the high level of returns that Houston-based ConocoPhillips and other operators are seeing mean it has the greatest potential of all U.S. shale fields.

"The Eagle Ford is by far the most important unconventional reservoir play in North America today," Leveille said.

The ConocoPhillips forecast set the stage for this week's conference, where talk turned to the future of the Eagle Ford, the potential for oil and gas production in neighboring Mexico and sustainable development - basically the idea that no one in South Texas wants to end up living in a post-bust ghost town.

"Everybody talks about the boom and bust," said Leodoro Martinez, head of the Eagle Ford Consortium, a group of elected officials, companies and residents. "We want to talk about the boom without having a bust."

Tuesday, several officials said they hate even the word "boom."

"After a big explosion, what's left?" asked Bruce Pearson, city manager of Pleasanton. "Nothing. I prefer to think of the Eagle Ford opportunity."

Leveille said the region will see "decades and decades of production."

ConocoPhillips in the last year has added 1,000 planned drilling locations. It now plans 3,000 wells on 221,000 acres in the Eagle Ford, where it's running 12 rigs and will spend $3 billion this year.

"What you're seeing unfold in the Eagle Ford is probably the greatest energy success story we will see in the 21st century," Leveille said.

Another forecast

The Texas Alliance of Energy Producers' estimates are slightly less optimistic than Leveille's, but also point to surging production. The industry group estimates the state's crude oil production rose to 2.7 million barrels per day by the end of 2013 and will cross the 3 million mark before year's end.

Saudi Arabia produced 9.7 million barrels daily last month, according to the Wall Street Journal.

While it's difficult to find perfect comparisons of world output, the Texas group's estimate puts Texas ahead of Iraq, which produced just under 3 mil- lion barrels of crude oil and condensate in 2012, according to the U.S. Energy Information Administration.

Texas oil output peaked in the 1970s and went on a long slide, including a 1980s bust that devastated the state's economy. A few years ago, before shale-oil drilling started, the state produced around 1 million barrels per day, about as much as Ecuador, Leveille said.

South Texas is transforming alongside the Eagle Ford - a formation that everyone in the industry knew was there all along, but could never tap. Drillers used to talk about getting gas "kicks" while drilling through the shale.

San Antonio billionaire Red McCombs said his oil and gas company has drilled around 500 wells in the region since 1965, often passing through the Eagle Ford on the way to another formation.

"We always hated it because it was too hard to get through," McCombs said. "It didn't produce anything. All it was was trouble. It turns out it was because we didn't know what to do with it."

The use of horizontal drilling techniques and hydraulic fracturing opened up a boom in South Texas and the Permian Basin. Fracturing pumps millions of gallons of water and chemicals at high pressure to break shale and prop open the cracks with sand, letting oil and gas flow up a well.

The boom has brought a host of concerns - including road damage, wrecks, a lack of health care services and heavy water consumption - as well as smaller issues that are changing the culture.

"I used to go to the grocery store and it would take an hour because you'd say hello to this person and that one," said Roger Garza, a city councilman in Pleasanton. "Now they're all strangers. Sometimes I wonder what happened to my town. It's a completely different atmosphere."

Rural connection

There's also a sense that rural South and West Texas need to band together to get the attention of the Legislature.

Noel Perez, city administrator of Dilley, said rural communities don't have enough influence statewide. He said he's glad for the oil field activity because "everybody was dying a slow death" before it. But he wants an accounting of the region's groundwater resources.

While the industry uses a small slice of water statewide, water is sourced locally. And with drilling happening in the state's driest regions - and during a drought - the heavy use of water for hydraulic fracturing has some communities worried.

"They can make all the money in the world," Perez said. "We're doing great in oil. Where's the water?